China's new economic tsar faces challenges emulating his predecessor；Evergrande Said to Have Proposed New Debt Plan, Reuters Says
Chinese firms return to profit growth as stabilising measures feed into economy; Joe Biden picks Asia expert Kurt Campbell for deputy secretary of state
Welcome to this issue of The China Brief. Today is November 1, 2023. Here at The China Brief, we bring you the latest news on China's politics, economy, and society from global media sources, along with exclusive expert analysis. If you find our content helpful, please subscribe to our newsletter.
China's new economic tsar faces challenges emulating his predecessor
Reuters
China's new vice premier, He Lifeng, is emerging as one of President Xi Jinping's most powerful allies, but according to some sources, he is yet to gain the same standing as his predecessor in financial markets and the diplomat community. He is tipped to become head of China's highest-ranking financial watchdog, the Central Financial Commission, which is being set up to strengthen the party's control of the country's $61tn financial industry. He is also in charge of tackling the local government debt crunch and the downturn in the property sector, two crises that threaten China's long-term growth potential.
Joe Biden picks Asia expert Kurt Campbell for deputy secretary of state
Financial Times
President Joe Biden is poised to nominate Kurt Campbell to be deputy secretary of state, in a move that will catapult the influential White House Indo-Pacific tsar to be the second-ranking diplomat in the US. The White House plans to nominate Campbell, a veteran Asia policy official who previously served at the state department and Pentagon, for the role imminently, according to people familiar with the situation.
Chinese firms return to profit growth as stabilising measures feed into economy
South China Morning Post
Chinese listed companies returned to profit growth in Q3 2020, with profits rising by an average of 0.5% YoY, according to Haitong Securities. This follows a 9.4% slump in Q2 2020. The improvement in corporate earnings may help lift the valuation of Chinese stocks, which are currently trading at 13x earnings, below the 10-year average of around 15x. Haitong Securities expects full-year earnings growth of up to 5%.
Evergrande Said to Have Proposed New Debt Plan, Reuters Says
Bloomberg
China Evergrande Group is proposing a new debt restructuring plan for offshore bondholders, according to sources. The plan would involve swapping debt for about a 30% equity stake in each of the company's two Hong Kong-listed subsidiaries. Evergrande's legal representative mentioned that shares of China Evergrande New Energy Vehicle Group and Evergrande Property Services Group would be used in any future debt-restructuring attempts. The developer shocked creditors last month when it said it would reassess its offshore-debt restructuring plan due to being unable to meet Chinese requirements to issue new bonds.
Asia's factories squeezed as China's nascent recovery teeters
Reuters
Factory activity in Asia declined in October, with China's manufacturing purchasing managers' index (PMI) falling to 49.5 from 50.6 in September, according to a survey by Caixin/Markit. Japan and South Korea also saw a contraction in factory activity, while Vietnam and Malaysia experienced the fallout from China's slowdown. The downturn in Asia's manufacturing sector is threatening the region's major exporters and recovery prospects, as they grapple with weaker global demand and higher prices. The International Monetary Fund recently warned that China's weak recovery and the risk of a prolonged property crisis could further damage Asia's economic outlook.
Tesla Cleared of Fault in Fatal Chinese Crash, Local Media Reports
Bloomberg
A Chinese court has ruled that a Tesla vehicle was not at fault for a 2022 accident that resulted in two deaths and three injuries. The court dismissed claims by a social media influencer that the crash was caused by a malfunction in the Model Y. A forensics investigations institute confirmed that the accident was not caused by defects in the steering or braking system. The influencer has been ordered to issue a public apology and pay Tesla compensation for reputational damage. This ruling comes after Tesla recently won its first jury trial in the US over a fatal crash that may have involved the use of Autopilot.
Chongqing LGFV Is Said to Mull Possible Tender for Dollar Notes
Bloomberg
Chongqing Nan'an Urban Construction & Development is reportedly considering launching a dollar bond tender offer. The details of the offer are not yet clear and may change. The local-government financing vehicle (LGFV) from China's Chongqing is currently trying to identify holders of its two dollar bonds that mature next year.
China's coast guard urges Japanese vessels to halt illegal actions in waters near islands
Reuters
China's coast guard has called on Japanese vessels to stop all illegal activities in the territorial waters of the Diaoyu Islands, also known as the Senkaku Islands. The coast guard said that three Japanese ships and several patrol ships had illegally entered the territorial waters, and it took necessary control measures in accordance with the law.
Macau Casino Revenue Jumps in October on China Golden Week Boom
Bloomberg
Macau's casino revenue rose in October to 74% of pre-Covid levels, driven by a surge in tourists during China's Golden Week holiday. Gross gaming revenue increased 400% to $2.4 billion, surpassing analyst estimates.
Southeast Asia's internet economy growth to slow in 2023
Reuters
Southeast Asia's internet economy is projected to grow by 11% annually in 2023, down from 20% in 2022, according to a report by Google, Temasek Holdings, and Bain & Company. The report also lowered the estimate for the region's internet economy in 2025 from $330 billion to $295 billion. The slower growth is attributed to a long-term goal change and post-pandemic stabilization. Vietnam's digital economy is expected to grow the fastest in Southeast Asia, with annual growth of 20% from 2023 to 2025, reaching $45 billion by 2025. Private funding for digital economy-related sectors has declined to 2017 levels, but cash reserves for investments are still rising.
Haze lingers in Beijing as fog blankets parts of north China
Yahoo US
Hazy weather conditions are set to continue across Beijing and other parts of northern China, according to forecasters, who blamed poor atmospheric diffusion caused by weak cold air currents. Visibility in the capital was less than 500 metres, according to the China Meteorological Administration. Moderate to heavy air pollution is expected in Beijing, Tianjin, Hebei and surrounding cities until Thursday, with short bouts of severe conditions.
Moutai shares jump after Chinese liquor maker raises prices
Financial Times
Shares in Kweichow Moutai, one of China’s most valuable businesses and a leading producer of baijiu, have risen 6% after it increased distributor prices for the first time in six years. The company, which now has a market cap of over Rmb2tn ($290bn), raised the price of its flagship product by 20% to Rmb1,169. The move is seen as positive news for China’s struggling stock market, which has been hit by poor economic data and worsening relations with the US. The price increase is likely to result in “significantly increased profit growth in 2024”.
U.S. Secretary of State Blinken to visit S.Korea
Reuters
U.S. Secretary of State Antony Blinken will visit South Korea on November 8 and 9 to discuss North Korea and alliance issues with Foreign Minister Park Jin, according to South Korea's foreign ministry. The visit will also cover economic security, cooperation on industrial technology, and regional issues of mutual interest. This marks the first visit by a U.S. secretary of state in two and a half years and comes at a time of heightened security cooperation between the allies and increasing concerns about North Korea's military cooperation with Russia.
Halloween revellers throng Shanghai, some wearing costumes seen as a protest to China policies
Reuters
Halloween celebrations in Shanghai saw some participants wearing costumes that poked fun at China's strict COVID-19 restrictions. While most attendees did not dress up or wore traditional costumes like monsters and superheroes, some attracted attention for dressing in blue and white hazmat suits, which gained infamy in China last year for being used by authorities to enforce COVID-19 curbs. Other costumes included depictions of China's slumping stock market and a famous author known for his works on unemployment. Public critiques of government policies are rare in China, but the Halloween costumes were seen as a rare showcase of free expression. Police were present but made little effort to stop the gathering, although some individuals in subversive costumes were escorted away.
Chinese Public Security Minister Visits Myanmar Amid Northern Fighting
Diplomat
China’s Public Security Minister Wang Xiaohong held talks with Myanmar’s junta on establishing “peace and stability” along their shared border, several days after three armed groups launched coordinated attacks against junta positions in the country’s northeast bordering China. The renewed fighting has serious implications for Chinese interests in Myanmar, which center around the creation of a transport corridor connecting Yunnan province to the Bay of Bengal. Under the rubric of the China-Myanmar Economic Corridor (CMEC), Beijing has planned highway and rail links from China to Myanmar’s coast, as well as free trade zones and a deep-sea port at Kyaukphyu, in Rakhine State.
What is APEC? Asia-Pacific leaders head to San Francisco
Reuters
The United States is set to host the 30th Asia-Pacific Economic Cooperation (APEC) summit in San Francisco this month. The highlight of the summit is expected to be a bilateral meeting between US President Joe Biden and Chinese President Xi Jinping. APEC, founded in 1989, is a forum for regional economic integration and includes 21 member economies that represent 38% of the global population, 62% of GDP, and almost half of global trade. The summit is expected to focus on the theme of creating a resilient and sustainable future for all.
Guangzhou issues housing vouchers in move that could spur property demand
South China Morning Post
Guangzhou has become the first tier-1 city in China to introduce housing vouchers to compensate residents displaced under urban-renewal efforts. The move is expected to boost local housing demand and ease pressure on municipal government expenditures. Residents can use the vouchers to purchase new homes and enjoy tax benefits. While the impact on housing demand and prices nationwide is expected to be muted, this measure is likely to spur demand for housing and help revive the local property market. Other cities in China have also rolled out voucher programmes to boost housing demand and reduce the number of unsold homes.
They Propelled China’s Rise. Now They Have Nothing to Fall Back On.
NY Times
China's migrant workers, who were once the backbone of the country's economic growth, are now facing increasing hardships as job opportunities become scarce. These workers, who number around 300 million, lack the social benefits enjoyed by city-born individuals and have limited job security. They are among the most vulnerable groups in China's economic downturn, particularly as real estate and infrastructure construction jobs become harder to find. The COVID-19 pandemic has further exacerbated their difficulties, with nearly 30 million migrant workers unable to find work in 2020. Many of these workers are unable to return to their home villages due to limited job prospects and low incomes in the agricultural sector. The lack of a safety net for migrant workers is a pressing issue in China, as they are often unable to rely on government support or their families for financial assistance. The situation has left many workers feeling lost and uncertain about their future, with little hope for retirement or a better quality of life.
China sending more police to Solomon Islands for Pacific Games security
ABC
China is sending additional police to the Solomon Islands to provide security for the Pacific Games, which are due to begin later this month. The move has raised concerns in Australia, which has offered to provide additional security personnel for the event. The deployment of Chinese police is seen by some as part of a wider Chinese push to displace Australia as the Solomon Islands' main security partner.
Nvidia shares drop after report of cancelled China orders
South China Morning Post
Nvidia's shares fell by 5% to a five-month low after the Wall Street Journal reported that the company may have to cancel up to $5bn worth of advanced chip orders to China due to new US government restrictions. The AI giant was informed last week that its AI chip orders scheduled for delivery next year to major Chinese technology companies were subject to export restrictions announced by the US Commerce Department. Nvidia's stock has fallen nearly 20% from its record high in August. The Biden administration recently imposed export restrictions on shipments of AI chips to China as part of efforts to prevent the country from acquiring cutting-edge US technologies.
PBOC Drains Liquidity in Signal It Sees Rate Surge as Temporary
Yahoo US
The People’s Bank of China (PBOC) withdrew CNY 109bn ($14.9bn) via seven-day reverse repurchase agreements from the money markets on Wednesday after Tuesday’s sudden surge in short-term borrowing costs. The move suggests that the PBOC views the surge as a temporary disruption. The withdrawal comes despite funding conditions tightening sharply due to tax payments and large government bond sales. "The net withdrawal today is in line with the tradition for the beginning of a month," said Zhaopeng Xing, senior China strategist at Australia & New Zealand Banking Group.
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